GLOBAL - The number of cases filed and assets claimed through securities class actions climbed again in 2007, despite evidence just 18 months ago suggesting interest in case pursuance was slowing.
Findings of a study conducted by Nera Economic Consulting project a total of 207 federal filings will have been filed in the United States by the end of 2007, sparked in part by shareholder claims against companies involved in the US subprime mortgage market crisis.
This is figure is up 58% compared with 2006, when cases reached their lowest level in a decade at 131 cases, but even with the removal of subprime cases the total number of filings rose by 40% by the end of the year.
Moreover, sums paid out to claimants, even with the removal of major cases such as the $3.2bn Tyco International and $1.03bn McKesson HBOC settlements, hit a new high as the average settlement increased to $24.4m over the five-year period between 2002 and 2007 compared with $11.5m between 1996 and 2001.
Sums agreed within the 12 months were also much higher, reaching $33.2m in 2007 compared with $22.7m the previous period.
Nera decided to separate out the "mega settlements" of over $1bn from these statistics because of the significant sums involved, because had they been included the average payout would have risen to $54.7m in 2007 alone.
Far from deterring investors from continuing to get involved in class actions, suggest the report's authors, it is anticipated a greater number of cases will be filed in 2008, especially on the back of damage done to financial investments over the summer credit crunch.
"As the crisis in the credit markets continues to deepen and the market for subprime mortgages continues to suffer accordingly, more litigation is likely to follow," said its authors Dr Stephanie Plancich, Brian Saxton and Svetlana Starykh.
Indeed, while no case has yet been filed directly against investment houses which have suffered significant losses through their exposure to the subprime markets, Caroline Goodman, managing director of Institutional Protection Services (IPS) told IPE there is increasingly noise on the conference circuit about the prospect of such cases involving European pensions funds as investors.
"Towards the end of last year we were really hearing about this as the big global financial stocks, such as Merrill Lynch, were being hit. Pension fund officials at conferences are beginning to talk about the status of some firms. These are early stage discussions but we could see these cases come through this year. There is an understanding the meltdown for pension funds needn't have happened," said Goodman.